Achieve Financial Independence: Smart Investment Strategies Revealed

John Harcar (00:02.241)
Alright, hey guys, welcome back to our show. I’m your host John Harcar and I’m here today with Mike Preshman and what we’re going to talk about besides, you know, his journey in business and real estate, you know what got him to today, but we’re going to talk about, you know, how he’s analyzing deals, analyzing data and how you could do it and also deal with the uncertainty, you know, of things that might happen.

Remember you guys that investor fuel we help real estate investors service providers I mean really all real estate entrepreneurs to the five extra business We do that by providing tools and resources to grow the business you want to have to live the life you want to live So Mike came in welcome to our show

Mike (00:41.272)
Thank you, thank you for having me.

John Harcar (00:43.174)
Cool, man. I’m excited to talk about analyzing deals. think that’s something that people maybe don’t do as well or as often because maybe those uncertainties. But before we talk about all that, give our audience a little bit about you, how you got your experience in business and real estate and what got you to today.

Mike (01:01.55)
Sure. my background, I’m an immigrant. I came here from Ukraine when I was nine years old. so single mom kind of, so background kind of was very focused on kind of computer science, tech, kind of nine to five jobs. So really.

you know, get a degree, go to college, kind of very studious and kind of that background. And so I got a master’s from Harvard in the Boston area. I did entrepreneurship. I did computer science. I was very passionate in that world. I went to a lot of conferences. was very, you know, climbing the corporate ladder, starting companies. And so around like 2015, I kind of realized that, you know, my companies weren’t taking off and we kind of…

John Harcar (01:25.125)
Mm-hmm.

Mike (01:50.53)
we bought a vacation rental on the Cape, Cape Cod, Massachusetts. So we bought a house actually for ourselves and then it took a lot of convincing with my family and my mom and kind of to convince them to give it a try to rent on Airbnb. And so right away I saw the potential, I saw the income and kind of the light bulb went off. And so that kind of became the fuel that kind of started me into that path of getting into business and real estate and so forth.

In 2015, we had one house. Next year, we kind of used the income from that house to buy a second house. And then kind of that started to be a business. The third year, we bought another Airbnb. And so now we have three vacation rentals and it’s really kind of taking off. And so at that point, I’m starting to realize that managing these vacation rentals is very difficult, right? So you have tenants, you have a lot of tenant turnover. There’s a lot of…

and you’re dealing with a lot of stuff. so we have this business, but I’m starting to discover bigger pockets, right? So I started to consume bigger pockets, know, voraciously. started listening to podcasts, learning about multifamily. And so at that point is when I kind of made the shift and started investing into multifamily. And so that was around 2019. I quit my job shortly after that. And so we’ve leveraged so many techniques. I’m a voracious reader. I listen to tons of

podcasts, I, you know, so I’m very kind of studious and study the game of real estate investing. And so, you know, I can, I can share some techniques that, really kind of helped me with my journey. So I’ll share it just very quickly about myself. So currently we have a little bit north of 30 million under management. It’s just me and my wife. So we didn’t do some education. We’ve only raised a little bit of debt at times, but mainly we kind of built our portfolio, putting all of the money that we make back into, into these assets, you know,

John Harcar (03:18.897)
Mm-hmm.

Mike (03:44.596)
raising rent, fixing them up, et cetera, and kind of watching our portfolio grow. And so we’ve done it in the Northeast. So we invest in New Hampshire, Massachusetts, and Rhode Island. At the moment, have about north of 20 assets. I think it’s between 23 buildings. And so now we’re kind of doing 1031 exchanges. We’re leveling up our game. In evolving our path from, there’s a lot of challenges in dealing with 10.

John Harcar (04:06.417)
Mm-hmm.

Mike (04:14.52)
and property management and so the assets that we’ve had.

traditionally have been kind of high yield assets, right? So we’ve done really well, like there’s been a lot of appreciation. With high yield assets, we’ve dealt with kind of C minus kind of assets, which very high yield, but you’re dealing with turnover, you’re dealing with tenants, you’re dealing with a lot of problems. So now that we’ve built up a relatively sizable portfolio, we have a kind of a pretty decent kind of…

John Harcar (04:25.969)
Mm-hmm.

Mike (04:46.048)
net worth and so forth, we’re starting to level up our game by 1031 into bigger, maybe B-class assets, starting to look into commercial. so moving up the ladder to get to the point where the assets are more manageable essentially. So this has been my journey and kind of happy to share along the way some techniques that I’ve learned that have helped me with the decision-making and analyzing deals and so forth and so on.

John Harcar (05:14.972)
Got it. All right. If you watch any of my podcasts, I like to go backwards. I like to go back, I should say. So when you mentioned you were had some businesses weren’t doing so well or whatever, were these businesses you’ve owned? This is before you bought that rental. Were these businesses that you owned or businesses you’re working for?

Mike (05:19.436)
Yeah. Sure.

Mike (05:32.174)
No, so I’ve started a couple of companies. I’ve done a startup incubator. So was super into the tech world. wanted to be the next kind of Mark Zuckerberg, Bill Gates. computer science was really a thing. So I was really in that world, not fully understanding the probabilistic approach of the odds of, in realistic, you have a very predictable path of.

John Harcar (05:43.036)
Hmm

John Harcar (05:52.294)
Sure, right.

Mike (05:53.57)
growing your net worth and so forth. In that world, it’s a lot more of, you know, get asymmetric returns, right? So you could get really, really lucky and you could do really well, but it’s unlikely, right? So the odds are that you’re gonna hustle, you’re gonna put in the time and you’re gonna end up right where you started, right? And so that happened to me a couple of times. And that’s when I kind of realized that real estate was potentially this, you know, fixed predictable path for me to…

John Harcar (06:21.902)
Sure. And you bought that one first property as a vacation rental business? Or did you just buy it for your family to go and just go and hang out? OK. So then where did the whole intro to real estate or the seed of real estate get planted from? mean, you weren’t listening to Bigger Pockets at that point, were you? Is that where you? No.

Mike (06:22.68)
successful.

Mike (06:28.886)
No, no, so we bought that for my family. Yeah, so we bought that as a family.

Mike (06:44.866)
No.

I’m just, I think I’m a little bit of a hustler by nature. And so I’m always, I’m always trying new things. I’m always trying to figure out kind of how to make things work. And so here we had this opportunity. So this actually is a great segue into the next point is that the opportunity was fully de-risked, right? So once we owned the asset for me to put it up on Airbnb to see what we can get for it and to start to run a business was basically free, right? So there’s nothing to risk.

that we basically put it up on Airbnb. so, the first…

time we rented it. I mean we had problems here and there but it was four thousand a week, right? Then it was five thousand a week. very quickly, right? So this is kind of like a, and by the way this house that we purchased at the time was three hundred sixty five thousand dollars, right? So crazy cheap and really insane returns. And so that kind of, I’m onto something, right? So that’s why, and I felt that wave of vacation rentals was really

John Harcar (07:40.668)
Alright.

Mike (07:46.7)
taking off on Cape Cod across the country. And so that’s when I felt like this is an opportunity I need to seize. So was willing to go to bat against my family. I won that battle, thankfully. my mom didn’t want to, she wanted that as like a family and all this kind of stuff. My wife didn’t see that as a vision, right? So it really kind of took a lot of convincing, but.

we were able to, and then we used the proceeds. like year one, let’s say we made a profit of like $40,000. So I took those $40,000 plus a little bit, we bought a second house also around $450,000. So we put it down payment, right? And so we bought a second house and now it’s a business, right? And so now the first house is now making $50,000 profit and the second house is making, let’s say 45, right? So now we have $100,000 in one year of profit that I rolled into the third house, right? So this is kind of year one, two and three.

Now we have three houses, each one of them is making about 50. And so now it’s $150,000 a year that we rolled into kind of the next kind of multifamily investment once they discovered bigger pockets and so forth. So that was kind of the, not yet. So I quit my job.

John Harcar (08:52.782)
Now are you doing this full time at this point? Not yet.

Mike (08:59.95)
2019 right as I got into multifamily. So multifamily was kind of the thing. And by the way, so I’ll share this. I’m sure a lot of your listeners are familiar with this technique of house hacking, but that’s free, right? That’s a fully de-risked thing that I’ve done. so…

I now have a Ascent Center Management, just myself, over $30 million. We have a pretty solid net worth. We have a lot of units. I still house hack. So I live in a 5,000 square foot house. We have an in-law apartment. We rent it out. basically pays a very good chunk of that.

John Harcar (09:35.74)
How was your mortgage?

Mike (09:37.774)
I reinvest all those funds back into making more and more investments, right? It’s almost, I mean, at some point it’s kind of, you know, right now I’m just kind of paying it forward, delete gratification is a big theme in my life, right? So kind of, you know, I don’t.

I don’t buy nice cars. I drive an F-150. don’t, you know, once in a while I’ll go to a nice restaurant or I’ll stay at a nice hotel. But for the most part, kind of, the most enjoyment is kind of that delayed gratification of putting the money back into the business, buying more assets and stabilizing the business. It’s a grind, right? There’s a lot of very, you know, it’s a grind. There’s a lot of unpredictable.

tenants and evictions and I live in Massachusetts, right? So we have eviction laws are insane. Hampshire is not that much better. so, everybody says have third party management, right? But with third party management, C minus assets, C, C minus assets, right? I don’t wanna degrade my assets, but a lot of them are, it can be, and it’s very difficult to manage, right? And so then what you predict on the pro forma where you think you’re gonna be cash flowing 10,

John Harcar (10:25.083)
Right.

Mike (10:50.128)
$15,000 a month, then all of a sudden it’s three. So that happens too. So you have to be, some of all in my business, diversifying and kind of repositioning my assets.

John Harcar (11:02.972)
So then where did you learn, I’m going back and I’ll keep going forward, but where did you learn, okay, once you got the first one and then you turn into a business and you get to it, is there somewhere specific besides BiggerPockets or maybe anywhere else you reached to find, how do I run these things like an Airbnb? It’s different type of business that I think you were, you know?

Mike (11:23.52)
Yeah, yeah, Yeah, for sure. Yeah. You know, bigger pockets was a impetus only because today bigger pockets is one of many, right? So I don’t mean to, but at the time when I discovered it was just, you know, I went to their conference, I listened to a lot of, so what it gave me just like the story that I’m sharing now, and there’s a lot of facets to kind of my world and kind of how I built my business, but there is.

John Harcar (11:35.515)
Mm, sure.

John Harcar (11:48.602)
Right.

Mike (11:50.57)
know, thousands of people like me, right, that have done it in different parts of the country with different stories, different hurdles that they crossed. And so for me, when I heard those stories, when I heard those people come up and share those stories, it kind of, built that muscle of understanding what to look for, what to encounter. And so I kind of built my own path in understanding what is it, where’s the opportunity around here? You know, a lot of people are investing in the sunbelt. That wasn’t the right opportunity for me. I live in Boston.

John Harcar (12:18.032)
Right.

Mike (12:18.67)
And then you start discovering, you discover section eight, you discover the different housing programs, discover the government helps you out here. I have this technique I’ll share, which I think every time I share it, any mastermind or anywhere that I go, people find this fascinating. don’t know why, but one of the techniques that I use before buying assets is I will test

John Harcar (12:42.684)
Let’s hear it.

Mike (12:47.89)
the demand for that rental. And the way that I do it amongst other ways is like can put up an ad on Facebook before you own the asset. And so you can test how many people are looking for this particular kind of apartment in this area for what price point. And so in addition to using a rentometer, in addition to using HUD rental standards, you can really dive in. Beyond that, I’ll do a lot of, I’ll call section eight.

John Harcar (13:12.315)
Right.

Mike (13:16.174)
I’ll talk to them. I’m buying an asset right now. It’s a larger asset. The price point is a little bit bigger than I used to buy. So now it’s close to $4 million, but it’s in an area that actually is not very heavily populated. So my philosophy is kind of if everybody’s a dog, be a cat. So basically look the other way. So for example, right now the Sunbelt market is oversaturated.

John Harcar (13:38.428)
Right

Mike (13:45.576)
And so you see a lot of the just a rental report came out for the country and like all of Northeast and Kansas City and even Detroit and New York, the rents are like going up, right? And then you look at Austin and Texas and Florida and South Carolina, like all these rates, which is kind of, we should have seen that coming almost, because everybody kind of jumped on it so much demand, so much supply and everybody is outbidding each other, et cetera. Anyway, so this market, it’s a little bit of a risk, but I own some assets nearby.

John Harcar (14:08.656)
Mm-hmm.

Mike (14:15.182)
But so in order for me to understand what I literally cold called every business in town to find out like how much would they rent an apartment in this building? Do they have workers that are looking for rent? And so I just really build up my model around, know, I’m spending a lot of money, like, right? And it’s one of those things that at times these things are not comfortable, but you sort of build up that muscle. And I think, you know, if you’re a business owner, if you’re…

John Harcar (14:29.286)
Yeah, yeah.

Mike (14:42.424)
you know, try to make it big or if you’re trying to provide for your family, you kind of have to exercise that muscle of doing what you don’t want to do, right? And so, you know, for me, that’s another kind of big theme that is very important to me is kind of doing the hard things. Not a cliche from a book, but it’s just in general. It’s just like I do cold showers like every day, right? And in fact, summers kind of doesn’t do it justice because the water gets warmer.

John Harcar (15:04.156)
Yeah.

Mike (15:11.918)
But in the winter, it’s great, right? But that’s kind of like you build up that muscle, right? So then I got a cold call or I got to have this uncomfortable conversation with a broker or I have to go to court, right? You just do it, right? Whether you like it or not.

John Harcar (15:14.342)
Right? Yeah, yeah, yeah. 100%.

John Harcar (15:25.594)
I think that’s what it’s saying. You do what you do today what you don’t want to do so you can do what you want to do tomorrow.

Mike (15:31.31)
Exactly. yeah, yeah. Exactly. So, know, or you don’t have to be great to start, but you have to start to be great. You know, those those kinds of things. So, yeah, I can, you know, there’s a there’s a big so you started kind of in the intro, I’ll kind of speak to a very big there’s a there’s a book, I’ll share that there’s a book, a lot of great books, but there’s a book, the Dundoo investor.

John Harcar (15:33.372)
Something like that.

John Harcar (15:40.516)
Yep. Yep. Yep. I love that.

Mike (16:00.27)
I know if you’ve ever heard of it, it’s a phenomenal book. so the guy talks about asymmetric risk and kind of basically putting yourself in a position to win. And so, you know, in investing, we’re basically trying to de-risk the thesis as much as we can so that we can have the ball in our favor, right? However, you can never be totally, right? So if you wait for the risk to go to zero,

John Harcar (16:01.02)
Mm hmm. I think so.

John Harcar (16:17.265)
Great.

Mike (16:27.866)
the opportunity has left, right? So you have to be comfortable with uncertainty. And so for me, I used to play poker, not as a professional poker player, but I’ve done a good amount of poker playing, just really enjoyed the game, read a lot of books on that topic. And so for me, kind of getting comfortable with uncertainty and have like probabilistic distribution around decision making is a very foundational life skill, right? And so the way that you, the way that I think about it is kind of nothing.

John Harcar (16:39.59)
Mm-hmm.

Mike (16:57.198)
literally nothing, not even the sun coming up tomorrow is 100 % or 0%, right? Everything is a distribution. Now that distribution could be, you know, with the sun it’s 99.9999, right? And something else is, you know, very close to zero. But usually it’s somewhere in there. so, and so you basically have like an expected value probability where you do a multiplication, you know, in your head, not formally of what’s the outcome that you’re looking for and what are the odds that outcome versus the other side. And,

John Harcar (17:21.82)
Mm-hmm.

John Harcar (17:25.263)
risk.

Mike (17:26.86)
And you basically, so I’ll give just a very, very quick example here. So right now I’m dealing with CoStar and I’m trying to decide if I should buy CoStar, right? And so they’re going back and forth. Their sales guys are very difficult to pin down, like how much they should cost. They’ll give me a number and so you can bring on a partner, so they’re kind of back and forth. so basically it’s a pretty hefty price. It’s close to like a thousand dollars a month. And so the decision that I am kind of, you know,

One thing you could say is, well, it’s a lot of money, I’m not gonna spend it, right? And you could say, well, if I spend the money, there’s no guarantee that I will actually get a deal. However, you could say, let’s assign a probability, hypothetical probability that if I get CoStar, there’s a 1 % chance that I make a million bucks in the next five years, right? So then you break down the five years, it’s $200,000 a year.

And so at a probability, so you basically multiply at a certain percentage, right? And so you say, and then you can say, okay, if I actually do that, I can reinvest that money and then that money will bring in more and more and more. And so then you can ultimately kind of assign a probability of let’s say 1 % that because of the decision by CoStar today, you could be worth an extra, you know, $40 million 15 years from now, right? Potentially, very small probability, right? So when you multiply it out, then you can say, okay, so the actual present value

John Harcar (18:39.547)
Mm-hmm.

John Harcar (18:47.182)
Very very true. Right, right, right.

Mike (18:52.844)
decision to buy CoStar is let’s say the $10,000 that they want per year or let’s say it’s something like $100,000 if you multiply out the $40 million times 1 % etc etc and so and so then kind of it becomes a lot easier to make these bold decisions to justify and it doesn’t mean that it will pay back every time but with enough of these decisions eventually

John Harcar (18:59.9)
Mm.

John Harcar (19:11.963)
right.

Mike (19:18.946)
you it pays off. And so you want to just be kind of a good decision maker across the board, both with investments and, you know, et cetera, et cetera. So this is kind of a…

John Harcar (19:27.942)
Well, what are some of the key things then you should tell people, hey, this is what you want to look for. These are the main couple things that will set you up for success.

Mike (19:37.676)
Yeah, I mean, so one is don’t die, right? don’t die, but basically like, you know, make sure that you have a rolling bank, bankroll, right? So from poker terminology, but you basically want to make sure that you don’t, you know, don’t go to jail, know, so things that can really, from a business standpoint, right? So you don’t want to crash and burn. So in your probabilistic,

distribution, you want to give yourself a chance to win without a significant risk of total and utter loss where you can’t come back and have another chance. And then equal, so this is kind of like the asymmetric, you you’re putting things in your favor. And then on the other extreme is,

John Harcar (20:15.153)
Got it.

Mike (20:24.758)
collecting data, hard work, making these phone calls, that’s free. So, if somebody, I remember when I was just buying my first house, the thing that gave me an advantage to find a really good deal is just go see the most houses. And so if you see more houses than anybody else, you don’t need to, you just go to open houses, you look at, you analyze the data, eventually you build up that muscle where you really can smell a good deal. And so the same thing with like right now,

John Harcar (20:50.788)
Right, yeah.

Mike (20:54.606)
I’ll say this, I’m going through this right now. I can do multifamily analysis in the back of the napkin. It’s very fast. It’s like robotic, right? So I really understand it. I look at the rent roll. I know what the expense ratio is. I know what the NOI is. It’s very, very straightforward.

John Harcar (21:07.014)
Mm-hmm.

Mike (21:12.724)
analyzing, let’s say a strip mall, is a very different animal, right? Because for me, right? For somebody else, right? But for me, I don’t get it. I’m like, well, there’s a vacancy. How do I know? What is the next Starbucks coming to? How do I know if I don’t have this vacant? So the risk is very not tangible. And so right now I’m really just trying to find that bigger pockets. I can’t, but I’m struggling. So there’s groups out there that do commercial. So I’m talking to brokers. So I’m really trying to build up that muscle.

John Harcar (21:17.884)
5%.

John Harcar (21:42.0)
Right.

Mike (21:42.65)
So that’s hard work that is kind of free. And eventually you build up that muscle and you start making deals and you have to be bold, you have to be comfortable, have to, or comfortable being uncomfortable, you have to be able to analyze, I’ll share this kind of theme I think is being able to…

retroactively analyze your narrative, right? So it’s very easy for me now to sit here and to say, hey, like I’m so smart, right? Because I have this portfolio, right? I killed it. There’s so many, I got so lucky, right? There’s so many deals that came my way that maybe I couldn’t have. There’s so many.

John Harcar (22:29.83)
Right.

Mike (22:30.54)
COVID, know, things doubled in price, right? You know, not, I didn’t create COVID, right? So there’s so, so you have to really be able to see your blind spots, right? And, and so for that, you have to be able to kind of look at the distribution of outcomes, both the good and the bad, right? You have to be honest with yourself so that you’re not, don’t, you don’t build up that hubris where now you’re vulnerable to making mistakes in the future because you were naive, right? Because you’re not,

John Harcar (22:59.044)
Well, and I think, you know, you said you think you got lucky. You didn’t get lucky. put yourself in a, you know, you put yourself in a position. You. Yeah. You put yourself in. No, you got lucky. mean, say it could be lucky. That’s all good, but you put yourself in. If you don’t put yourself out there, there’s no way to catch luck.

Mike (23:01.485)
Yeah. I didn’t tell that I got lucky. It’s luck played a role. I put myself in a patch to get lucky. Let’s put you know. Yeah. Yeah.

Mike (23:17.632)
Exactly. What I’m saying is we’re all lucky in a way as in, you, I’m a big believer that like, you know, our accomplishments are, you know, it’s not a religious thing. It’s just, you know, there’s a lot of factors that go into like living in this country and right. Like, you know, it’s a lot of. And so I don’t want to, you know, I think hubris is a it’s a it’s detrimental to to one’s success. Right. So I

John Harcar (23:30.91)
yeah!

Mike (23:46.228)
So I almost use it as a tool to remind myself not to have that.

John Harcar (23:50.332)
I just got the main message is get off your you know what and get moving. Do something. Make it happen. I love what you shared here, man. If folks want to get ahold of you, they want to maybe learn more about your story, talk to you little bit about how to properly, the best way to analyze things and how do they get in touch? What’s your social stuff, et cetera.

Mike (23:55.81)
Yeah. Yeah. Yeah. Yeah. Yeah.

Mike (24:13.07)
Yeah, yeah, so they can email me directly mpresh.gmail.com. Nothing fancy. have BNPLiving.com is our website. BNPLiving.com. Please reach out, happy to chat. I’ve been kind of on and off. I’m in a few masterminds and I kind of try to get out a little bit, but then I mostly have little kids and I run a business. And so it’s a…

I go back and forth, so my kids are five and seven right now, but I’m really heads down and kind of doing what I’m doing. I’m really passionate about it. reading a ton is a big theme, if anybody, I have a lot of book recommendations if somebody’s interested.

John Harcar (24:41.296)
They’re more difficult to get away.

John Harcar (24:52.283)
Awesome.

John Harcar (25:00.58)
Yeah, if you had to give one book recommendation, what would you give?

Mike (25:04.27)
I mean Dundo Investor is a phenomenal one. mean, you know, I’m a huge fan of like Charlie Munger and like mental models and that kind of stuff. So just kind of well-rounded thinking. There’s a lot. There’s like this famous blue book of real estate and commercial space. There’s, mean, I have books like all around, know, have hundreds of books. Every, every, every.

John Harcar (25:25.116)
Too many to say just…

Mike (25:27.36)
Every birthday, every New Year’s, every holiday, my family just gets me Barnes and Noble gift cards. I’m a nerd.

John Harcar (25:34.984)
Know you know my wife reads like crazy too guys. I hope you guys enjoyed the show man Mike thank you for coming in and dropping all that knowledge man. That’s some good stuff You know hope you guys all enjoyed the show like I did and Mike thank you again, and we’ll see you guys on the next one Cheers

Mike (25:50.934)
Awesome. Thank you guys. Bye.